How to Improve Your Credit by Becoming an Authorized User on Someone Else’s Account
As a Memphis bankruptcy lawyer, I get a lot of questions about how to improve your credit after filing bankruptcy. Fortunately, there are a lot of ways to make this happen. Bankruptcy isn’t a death knell for your credit score – it’s actually a fresh start. And among other tools, you can improve your credit after bankruptcy as an authorized user.
Here’s what it means to be an authorized user, how it can benefit your credit, and the steps to take to use this credit-building strategy effectively.
Understanding Authorized User Status
Being an authorized user on another person’s credit account means you have permission to use their credit card while benefiting from their positive credit history.
This arrangement allows other people – typically family members or close friends – to help you improve your credit score by sharing the responsible use of a credit card.
How Being an Authorized User Works
First you’ll need permission to begin this process. Someone will need to agree to add you to their account.
This usually involves a lot of trust on their part. If someone close to you decides they want to add you, the primary account holder (the person who owns the credit card) should reach out to their credit card company and grant you permission to be an authorized user on their account.
Next, their credit card company will report the other person’s positive payment history and credit utilization on both of your credit reports. This means their good behavior will reflect well on you. It’s like someone is vouching for you.
As an authorized user, you can use the credit card, but you’re not legally responsible for the debt. The primary account holder retains full responsibility for payments. As a result, sometimes people will add you to their account without giving you a card or all the information to access it until they’re confident you won’t abuse the situation.
Steps to Improve Your Credit as an Authorized User
Choose the Right Account/Friend:
It’s important the other user trust you, but you should also trust them. Make sure it’s a credit card account with a positive payment history and low credit utilization. The primary account holder should have a strong credit profile.
Confirm with the primary account holder that their card issuer reports authorized user activity to all the credit bureaus. Not all issuers do, so this step is crucial. Sometimes the card company will only report to one of the three credit bureaus. You need all three in order to get the most out of the strategy.
Keep Open Communication:
You should communicate openly and honestly with the primary account holder, who’s usually your close family or friend. Make sure you both understand your responsibilities and expectations: How often will you use the account, if at all? How can they know you’ll pay?
There’s real risk in this for them, so you might even want to consider giving them a security deposit to put them at ease.
Monitor Your Credit:
As always when building credit, to improve your credit after bankruptcy as an authorized user, you need to keep tabs on your score.
Regularly check your credit reports to make sure the account is being reported accurately and positively. Credit monitoring apps can make this easy for you. You should start seeing improvements in your credit score over time.
Use the Opportunity Wisely:
While you have access to credit as an authorized user, you must use it responsibly. To do otherwise could ruin your personal relationships and tank your loved one’s credit. Avoid excessive spending (or any spending, depending on your agreement), and always make on-time payments if you’re responsible for any charges.
Help to Improve Your Credit After Bankruptcy
Becoming an authorized user on someone else’s credit account can be a valuable tool for improving your credit score, especially if you have a limited credit history or past credit challenges. By carefully selecting the right account, ensuring reporting to credit bureaus, and using the opportunity responsibly, you can benefit from the positive credit history associated with the account and boost your credit score over time.
However, this is only one tool in the toolbox for improving your credit after bankruptcy. Other important steps include:
- checking your credit report
- budgeting well
- applying for a secured credit card
- and using credit-builder loans
Our firm helps all of our clients rebuild their lives after bankruptcy, including helping you get to an A credit rating. We’ve even published a free report to answer some of your most common questions called Life After Bankruptcy.
If you’re struggling with debts you can’t pay, we’re here to help you through the entire process. Get a fresh start and start rebuilding your financial life today.